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Author Topic: Did Congress Kill the Debit Card?  (Read 497 times)
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corruptrelic
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« on: September 30, 2011, 03:32:57 PM »

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Some Americans are outraged that Bank of America intends to charge its customers a $5 fee for using their debit card. And simply switching banks might not help: others are expected to follow. While frustration over yet another bank fee is understandable, this one should surprise no one. Congress acted to cap the debit fees that banks could charge retailers last year, and banks are reacting by directly charging their customers a portion of these lost fees to make up the difference. The move could mean the end of the debit card.

Bank of America is actually being quite straightforward about its rationale for instituting this new fee: it blames the government. A provision from last summer's financial regulation bill promoted by Sen. Dick Durbin (D-IL) capped the fees that banks can charge retailers when customers pay with debit cards. The new rule goes into effect on Saturday. Andrew R. Johnson at the Wall Street Journal reports:

    Bank of America has said it expects the caps, which the industry lobbied against for months, to erase $2 billion in revenue annually.

    "The economics of offering a debit card have changed with recent regulations," a spokeswoman for Bank of America said Thursday.

The only thing surprising about this news is that anyone Congress was so blind to reality that they expected anything different. Did they really believe that banks would just shrug when their revenues declined by billions of dollars? Since they can't get as much money from customers indirectly through debit interchange fees paid by retailers any longer, they're going the direct route and charging customers for using debit.

http://www.theatlantic.com/business/archive/2011/09/did-congress-kill-the-debit-card/245935/
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Fireball
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« Reply #1 on: September 30, 2011, 04:01:12 PM »

Sensationalist headline. Banks have been gouging retailers for years, and now aren't allowed to do so. So instead they're gouging their customers directly. Crappy behavior, now more transparent. Surely some banks will advertise that they don't charge fees, taking customers from the banks that do.

It's only $5 a month. The convenience of my debit card is worth $60 a year.
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« Reply #2 on: September 30, 2011, 06:50:50 PM »

The marketplace does need to be protected. Helping retailers is not a bad thing. The banks now have to operate in the open.

I agree, Fireball's debit card is worth 60/year. I bill tons of stuff to it. biggrin
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Ironrod
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« Reply #3 on: September 30, 2011, 11:43:36 PM »

Not worth the fee to me. But rather than switch to no-fee credit cards, as they intend for me to do, I will go back to using cash and writing checks. Let's see how they like making money out of paper again.
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Harkonis
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« Reply #4 on: October 01, 2011, 12:00:56 AM »

psst... they never stopped making paper money just because you weren't using it.   ninja
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Zarkon
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« Reply #5 on: October 01, 2011, 12:54:20 AM »

ProTip:  I'd be willing to bet that Credit Unions, smaller banks, and places like USAA won't do these fees. 
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Ironrod
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« Reply #6 on: October 01, 2011, 06:03:09 PM »

Quote from: Harkonis on October 01, 2011, 12:00:56 AM

psst... they never stopped making paper money just because you weren't using it.   ninja

Until a couple of years ago I paid all of our bills with paper checks (using currency for petty cash and credit cards only for major purchases). Then they trained me to use a debit card instead by giving me a 10 cent rebate on every transaction. Now they want to charge me for using a method that they originally bribed me to adopt because it reduces their processing costs?

Nope, not gonna happen. They can go back to processing checks. I don't mind writing them.
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Destructor
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« Reply #7 on: October 02, 2011, 03:01:42 AM »

Honestly, I never understood why anyone would use their debit card for making any purchases (other than directly paying bills and such).

If somebody takes your debit card number and uses it, your real money has just vanished out of your account until your bank fixes it. Hope you have funds in some other form you can use.

However, if somebody takes your credit card number and uses it, your credit card bill goes up, but you don't have to pay for it while it's looked into (at least with mine). No real money is lost or spent at any time.
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CeeKay
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« Reply #8 on: November 01, 2011, 04:14:48 PM »

Bank of America fee dropped: http://news.blogs.cnn.com/2011/11/01/bank-of-america-dropping-planned-5-debit-card-fee/?hpt=hp_t2
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Ironrod
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« Reply #9 on: November 01, 2011, 05:18:44 PM »

Well, good. I know they were losing a lot of customers over it.

My other bank (Citizens RBS) just ended their debit card rewards program that paid me 10 cents every time I used it. That came as no surprise, and won't change my behavior.

The cap on interchange fees has lowered my credit/debit card processing costs noticeably. Most merchants will simply pocket the small savings, but I intend to pass it along to customers in the form of a slightly reduced handling fee (cut from 75 cents to 65 cents per order).
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